Why Trading in the Financial Sector XLF ETF is Worrisome
The chart below represents trading in the Financial Select Sector SPDR ETF (XLF) with a portfolio of the big-name banks and other financial institutions, a major stock sector for obvious reasons. Looking at the XLF chart over the last two years as a proxy for the financial stocks we can see that a very negative price pattern has developed. These stocks are being sold with very heavy volume and bouncing with very light volume. This is a dangerous trend because it shows that the large institutions are exiting this group. And using rallies to sell. Until the price action improves for the banking sector, I will find it hard to get bullish on the market over the longer term. Typically during times of major selloffs there will be periods when stocks become oversold, resulting in some bounce backs. While bear market bounces can be fast and furious, they also are typically short lived.